Investment chief questions plan for private accounts

Lawmakers should shift focus to add-on accounts for Social Security reform, he says

GLEN JOHNSON, Associated Press

Published
5:30 am CDT, Friday, May 20, 2005

WASHINGTON - The investment executive President Bush lauds while selling his Social Security overhaul suggested Thursday the White House drop its insistence on private investment accounts funded with payroll taxes if that prevents Democrats from supporting the effort.

Bob Pozen, whose concept of "progressive indexing" for future benefits has become an administration favorite, said lawmakers should instead focus on so-called add-on accounts, which are funded with other revenues. The Boston investment chief has suggested increasing investment in Roth IRAs by lifting the existing caps on them.

"Given the lack of bipartisan support for carve-out personal accounts, the president should not insist on carve-out accounts if the Democrats support an overall legislative package for Social Security reform that is otherwise satisfactory to him," Pozen, himself a Democrat, said in a statement issued after he made similar comments at a think tank in the capital.

A White House spokesman said Bush remains committed to the carve-out accounts because they are the best way to allow low-income workers to invest without affecting their take-home pay.

"They are really the only way for lower-income workers, who live paycheck-to-paycheck, to take advantage of long-term investment," said spokesman Trent Duffy.

Democrats have accused the president of trying to starve Social Security by siphoning off some of its funding, while changing the program's nature from one providing a guaranteed government benefit to one managed by individuals and subject to the risk of the investment market.

Bush has proposed allowing workers under 55 to invest nearly two-thirds of their Social Security taxes in private accounts. He also has highlighted Pozen's plan for changing benefit calculations by keeping those for low-income workers linked to wages while shifting those for middle- and upper-income workers to an increasing reliance on a slower-growing price index.

Analysts agreed that in addition to focusing on securing Social Security, Congress should work on ways to encourage low-income workers to join middle- and upper-class workers in setting aside some of their own money for retirement.